There are around 15 factsheets, with three more to be added shortly, available to AMI members. Topics include a summary aimed at smaller firms, principles and cross-cutting rules, four outcomes, monitoring and evidencing outcomes, Senior Managers and Certification regime, culture and governance, vulnerability, outsourcing and working with third parties, marketing and lead generation, protection and general insurance and later life lending.
The trade body said that it believed that intermediary firms were starting from a good place as their role as advice firms were committed to driving good customer outcomes.
However, it said that Consumer Duty should be considered an opportunity to improve businesses, build trust in financial services and make customers more confident making financing decisions.
Stacy Penn, senior policy adviser at AMI, said: “There are many components to the Consumer Duty and it can feel overwhelming for firms, as they may not know where to start. That’s why AMI’s factsheets break down key components into digestible chunks and include product specific versions, to help broaden firms’ thinking in areas such as later life and protection and general insurance.”
She continued that at its “heart”, the regulation was about a “firm’s proposition and strategy”, with implementation occurring at firm level then feeding down to individual advisers via changes to a firm’s policies and procedures.
Taking the complexity out of Consumer Duty
Penn added that there were common misconceptions about Consumer Duty that it was keen to tackle with the factsheets.
One was that advisers would need to assess fair value at an “individual customer level” such as when they provide a mortgage recommendation.
“This is not true, as the FCA fair value requirements sit at a product or service level,” she explained.
Penn continued: “For lenders, this means assessing the fair value of their products and sharing relevant information with intermediary firms. AMI is working with lender trade body partners to develop a template which will allow lenders to provide this information to mortgage intermediary firms in a consistent format.”
She added that for intermediary firms, this would mean ensuring they understand the outcome of the lender’s fair value assessments and assessing whether their own distribution strategy, including fees, provides fair value to customers.
Penn said the second common misconception was around the cross-cutting rule of avoid causing foreseeable harm.
“The word ‘causing’ is important here. We’ve seen this cross-cutting rule positioned as firms ensuring customers ‘avoid foreseeable harm’, which is unrealistic and goes beyond the FCA’s requirements.
“Mortgage intermediary firms’ focus should be on the steps they can take to avoid causing harm to customers through their conduct, the products they sell and the advice they provide,” she explained.
Penn said, as an example, a mortgage intermediary firm may identify a risk of causing foreseeable harm to customers if it allows a customer to revert to the lender’s Standard Variable Rate (SVR). To prevent this, the firm could implement a formal policy requiring advisers to contact customers ahead of their deal expiry.
“These messages and more will help firms to remain on the right side of regulation,” she concluded.
